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Auerbach Weighs in for gTLD Lotteries
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I agree with the substance of Karl's remarks. Economists distinguish between first best and second best solutions.
Allowing TLDs to fail is the first best solution in the economic sense. This would allow the TLD slot or name to be reallocated by the market.
However, there is strong resistance within the ICANN community to the notion of failing TLDs. There may be some economic justification for this. If a significant number of TLDs fail, this might create a negative reputational externality. Translation: the fact that some TLDs failed might translate into a public perception that the DNS is not reliable.
Assuming ICANN (for either sound or unsound reasons) decides not to allow TLDs to fail, then the question becomes what is the second best solution. My prior post suggests that one implication of a system that requires TLDs to remain in operation (so long as thier are paying SLD registrants) is constrained expansion of the root space.
In other words, I agree with Karl Auerbach at the level of theory, but I think it is important to consider the possibility that ICANN will not be convinced to allow TLDs to fail.Lawrence Solum
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Should TLDs Be Allowed to Fail?
by lsolum
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ICANN has behaved as if it has the power to prevent TLDs from failing - hence the deeply intrusive inquiry into applicant business practices and the micro-management of TLD operator business practices. (Although that micro management appears to occur main when it benefits ICANN's image and rarely occurs when the party harmed is the public.)
However, ICANN has no ability to keep TLD operators afloat - ICANN's bloated budget isn't bloated enough to do a Chrysler/Lockheed style bailout of a failing TLD.
So, even if ICANN were to base policy on the notion of not-failing TLDs, the practical reality is that every now and then one of 'em will go belly up.
It seems to me better to recognize the reality of business failures and to not try to build an intrinsicly compromised system founded on the fantasyland that TLDs will not fail.
ICANN has never faced, much less answered, the question whether it is a consumer protection agency.
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